National Commission Upholds State Commission's Decision in Liberty Videocon Insurance Case

June 29, 2024

The National Consumer Disputes Redressal Commission, under the leadership of AVM J. Rajendra, found Liberty Videocon General Insurance responsible for service deficiency by rejecting an insurance claim based on an exclusion clause in the policy. The Commission ruled that the burden of proving the applicability of such clauses rests with the insurer.

Case Background

The complainant’s late husband held multiple accounts (Savings, Current, Recurring, and Term loans) with a bank that had procured a Group Personal Accident Policy from Liberty Videocon General Insurance. A premium of Rs. 100 was deducted from his accounts and paid to the insurer, ensuring coverage for Rs. 5,00,000. Tragically, the insured passed away due to an electric shock, confirmed by a post-mortem report as accidental death. The complainant submitted a death claim through the bank, but the insurer denied payment. Subsequently, the complainant’s complaint was dismissed by the District Forum. Upon appeal to the Chhattisgarh State Commission, the complaint was upheld, directing the insurer to pay Rs. 5,00,000 to the complainant along with Rs. 3,000 as litigation costs. Dissatisfied, the insurer filed a revision petition before the National Commission.

Arguments of the Insurer

The insurer contended that the deceased’s death did not qualify as accidental, citing that he had unlawfully connected an electric wire to a pole, which violated the terms of the insurance policy. Therefore, the denial of the claim was justified, asserting that the complainant was not eligible for compensation. Furthermore, the bank refuted the complainant’s accusations, clarifying that they solely collected and remitted the insurance premium to the insurer. They emphasized that the responsibility for claim settlement lay with the insurer, not the bank, and sought dismissal of the complaint against them.

Findings of the National Commission

The National Commission examined the core issue concerning the alleged violation of Part-III Para 4 and Part-IV Para 3 of the policy, which justified the denial of the claim under the insurance policy’s terms. To assess the matter, the Commission reviewed the policy provisions: Part III, General Exclusions, which excluded coverage for losses resulting from the insured’s intentional breach of the law, and Part IV, General Terms & Conditions, which required the insured to take reasonable precautions against accidental loss or damage that could lead to a claim.

Citing precedents such as M/s Texco Marketing Pvt. Ltd. vs. Tata AIG General Insurance Company Ltd. & Ors., the Commission emphasized that the insurer bears the burden of proof when invoking an exclusion clause. Such clauses must align with the contract’s primary purpose and may be construed narrowly if overly broad or inconsistent with the policy’s intent, as seen in cases like Shivram Chandra Jagarnath Cold Storage v. New India Assurance Co. Ltd. and B.V. Nagaraju v. Oriental Insurance Co. Ltd.

The Commission concluded that while the deceased’s actions in connecting the wire to the pole were unauthorized and failed to safeguard his interests adequately, the insurer had not sufficiently demonstrated the applicability of the exclusion clause.

As a result, the Commission upheld the State Commission’s ruling and dismissed the insurer’s revision petition.

Case Title: Liberty Videocon General Insurance Company Ltd. Vs. Uma Bai Dhankar

Case Number: R.P. No. 735/2018

Posted and reproduced in Public Interest by

Adv. Sulaiman Bhimani Legal Consultant

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